FINANCIAL ACCOUNTING & REPORTING 1 (BAC1634)

HANDOUT #4

QUESTION 1

ABC Bhd was incorporated on 2 January x8 with a registered capital of 100,000 ordinary
issued at RM1 per share.
The directors offered for subscription an initial public offering of 30,000,000 ordinary sha
follows:

a) 10,000,000 shares to institutional investors.

b) 20,000,000 shares at RM3 to public investors payable in full upon application and sub
refund of the difference in the event that the final IPO price is less than the offer price.

The final IPO price will equal the lower of (1) the IPO price of RM3 per share and (2) 95
the institutional price.

Applications for 10,000,000 shares were received from institutional investors and offers f
40,000,000 shares were received from public investors. The institutional price was determ
RM2.95. The final IPO price was eventually fixed at RM2.80 which represented the lower
price and 95 percent of the institutional price.

Applications were closed on 31 January x8 and all money due was received. The money
on oversubscribed shares from the public investors was refunded.

Required:

Show the journal entries and prepare the statement of financial position upon completion
above transaction.

ANSWER
RTING 1 (BAC1634)

ed capital of 100,000 ordinary shares

ng of 30,000,000 ordinary shares as

full upon application and subject to a

e is less than the offer price.

e of RM3 per share and (2) 95 percent of

itutional investors and offers for

e institutional price was determined at
0 which represented the lower of the IPO

due was received. The money received

unded.

ancial position upon completion of the

 FINANCIAL ACCOUNTING & REPORTING 1 (BAC1634)
HANDOUT #4

QUESTION 2
Sinbad Bhd's share capital was 80 million ordinary shares of RM1 each, and
its paid-up share capital comprised 60 million shares issued at RM1.20 per
share.

To facilitate the listing and obtaining of quotation for Sinbad Bhd's shares
on Bursa Malaysia, Sinbad Bhd made a public offering of 15,000,000 new
ordinary shares at an issue price of RM1.60 per share to the public for
which applications for 25,000,000 new shares were received. The company
directors decided to refund applications for 10,000,000 shares. All
application money was received when due.

Required:

Show the journal entries to record the abover transactions and prepare an
extract from the statement of financial position.

ANSWER
 FINANCIAL ACCOUNTING & REPORTING 1 (BAC1634)
HANDOUT #4

QUESTION 3

The extract from the statement of financial position of Nemo Bhd as at 31 December x8 is

Nemo Bhd

Statement of financial position of Nemo Bhd as at 31 December x8 (Extract)

RM
Equity and reserves
Issued and fully paid-up capital

30,000,000 ordinary shares, fully paid up 30,000,000

Retained profit 22,000,000
52,000,000

Due to the liquidity problem faced by the company, the directors decided to give to
the shareholders share dividend of one ordinary for every ten ordinary shares held
and the share premium and the retained profits were to be used for this purpose. At
the same time, Nemo made a rights issue of 1,000,000 shares to the existing
shareholders at RM2 each. The market price of the share was RM3 each.

Required:
Show the journal entries and prepare the statement of financial position upon
completion of the above transaction.

ANSWER
 1 (BAC1634)

mo Bhd as at 31 December x8 is given below:

31 December x8 (Extract)

rectors decided to give to

ten ordinary shares held
e used for this purpose. At
ares to the existing
was RM3 each.

ancial position upon

 FINANCIAL ACCOUNTING & REPORTING 1 (BAC1634)
HANDOUT #4

QUESTION 4

Carrot Juice Berhad has an issued and paid-up capital of RM45,000,000 comprising
45,000,000 ordinary shares, fully paid. It embarked on share buyback scheme. The
shareholders at the recent AGM passed an ordinary resolution to purchase
1,000,000 ordinary shares for immediate cancellation at a price of RM2.50 each.
Below is the statement of financial position of Carrot Juice Bhd before the shares
were purchased.

Carrot Juice Bhd

Statement of Financial Position as at 31 December x8
RM
Non-current assets 29,000,000
Net current assets 35,510,000
64,510,000

Equity
Issued share capital
45,000,000 ordinary shares, fully paid up 45,000,000
Retained profits 19,510,000
64,510,000

Required:

Show the journal entries to effect the above transaction and

prepare the statement of financial position after the puchase is
completed.

ANSWER
AC1634)

000,000 comprising
uyback scheme. The
o purchase
of RM2.50 each.
before the shares

mber x8
 FINANCIAL ACCOUNTING & REPORTING 1
HANDOUT #4

QUESTION 5

Given below is an extract of statement of profit or loss of Ayer Bhd., a listed company.

Profit for the year ended 30 June x5

Profit before taxation

Taxation

Dividend paid- ordinary shares

- preference shares

The following information is also provided:

a. Issued share capital on 1 July x4 comprises 2 million ordinary shares and RM500,000 7

On 1 July x4, RM500,000 10% convertible debentures (convertible into 200 ordinary sh
b. were outstanding.
c. Changes in capital structure during the year ended 30 June x5 are as follows:

i. On 1 October x4, a rights issue of ordinary shares on a one-for-four basis at 80 sen (

was RM1) was made.
ii. The basic EPS for the year ended 30 June x4 was 18 sen.
d. Tax rate is 30%.
 Required:

a. Compute the company's basic EPS for the current year and comparative figure for the p
b. Compute the diluted EPS fr the current year.

ANSWER
 FINANCIAL ACCOUNTING & REPORTING 1 (BAC1634)
HANDOUT #4

of profit or loss of Ayer Bhd., a listed company.

RM
700,000
-200,000
500,000

100,000
35,000

mprises 2 million ordinary shares and RM500,000 7% preference shares.

vertible debentures (convertible into 200 ordinary shares per RM100 debenture)

the year ended 30 June x5 are as follows:

ordinary shares on a one-for-four basis at 80 sen (market price before the issue

30 June x4 was 18 sen.

or the current year and comparative figure for the previous year.
ent year.
 FINANCIAL ACCOUNTING & REPORTING 1 (BAC1634)
HANDOUT #4

QUESTION 6

Given below is the income summary for Travel Bhd for the years ended 31 December x6 an

Profit before taxation

Taxation
Ordinary dividends

The following information is relevant:

a. On 1 January x5, the issued share capital consisted of 2 million ordinary shares.

b. On 1 July x5, 1 million ordinary shares were issued for a fair consideration of RM1.5
On 1 January x5, optons were granted to employees to subscribe 500,000 ordinary
c. for RM400,000.

The average market price of one ordinary share of Travel Bhd for the year ended 3
d. x6 was RM1 and RM1.20 each, respectively.
e. On 1 April x6, the company bought back 500,000 ordinary shares.
f. The net loss from discontinued operations for year x6 was RM100,000.

From the information given, you are required to calculate the basic and diluted EPS for yea
ANSWER
OUNTING & REPORTING 1 (BAC1634)
HANDOUT #4

vel Bhd for the years ended 31 December x6 and x5:

x6 x5
RM'000 RM'000
500 450
-150 -140
-50 -50

apital consisted of 2 million ordinary shares.

res were issued for a fair consideration of RM1.5 million.

ted to employees to subscribe 500,000 ordinary shares in Travel Bhd

dinary share of Travel Bhd for the year ended 31 December x5 and
ectively.
back 500,000 ordinary shares.
rations for year x6 was RM100,000.

ed to calculate the basic and diluted EPS for years x5 and x6.
 FINANCIAL ACCOUNTING & REPORTING 1 (BAC1634)
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QUESTION 7

The share capital of Rainbow Bhd as at 30 September x5 consisted of 8 million ordinary

shares amounted to RM4 million.
On 1 December x5, Rainbow Bhd consolidated two existing shares into one share.

On 31 December x6, the company issued 2 million ordinary shares fair price for cash. The
subscribers paid 50% of the capital. The company pays dividends on paid-up capital. The
balance of capital was paid on 1 October x7.

On 1 January x7, Rainbow Bhd issued 10% convertible loan stock of RM2 million. These
debentures may be converted into ordinary shares of 100 ordinary shares for every RM100
debenture.

The following information was available:

Year endedProfit after tax and interest
30.9.x5 RM380,000
30.9.x6 RM400,000
30.9.x7 RM440,000
30.9.x8 RM490,000

Income tax on company profits is 30%.

Required:

Calculate the basic and diluted earnings per share for Rainbow Bhd as at 30 September x5,
x6, x7 and x8.
ANSWER
NG & REPORTING 1 (BAC1634)
NDOUT #4

September x5 consisted of 8 million ordinary

ated two existing shares into one share.

2 million ordinary shares fair price for cash. The

ompany pays dividends on paid-up capital. The
7.

% convertible loan stock of RM2 million. These

y shares of 100 ordinary shares for every RM100

x and interest

er share for Rainbow Bhd as at 30 September x5,